Portable bank account numbers are an inevitablity

The UK banking sector is one of the least competitive in the world. A quick hop over the pond to the US, and you'll find just under 7,000 banks to choose from. In the UK, however, we've got just over 100 banks and building societies - of which only a fraction offer current accounts that are accessible to the mainstream. Roughly speaking, the US has 60 times more banks than the UK, serving a population which is just five times as big.

For a long time, the banking industry's response to this was to blame the regulator, claiming that too much red tape is what stops new challengers emerging. While there's certainly some truth in that assessment, regulation is just one of the barriers. For the challengers who have overcome the red tape and made it to the starting line - the likes of Metro Bank and M&S - the going has still been incredibly tough. And perhaps the main problem that these banks face is consumers' unwillingness to switch.

Too much hassle

While the British Bankers Association published research at the weekend showing that most people don't switch because they're happy with their bank, this - as you might imagine - is not quite the whole story. A significant number of people don't switch because they think all banks are the same, or they fear switching will be too much hassle - which in fairness it is. Even though we've now got a seven day switching guarantee, seven days is too long. Customers need to have the confidence that they can switch in a matter of hours - rather than feeling that switching is some kind of torturous journey that they're embarking on.

This is a view shared by Economic Secretary to the Treasury, Andrea Leadsom, who has suggested that the Conservative Party may make a commitment to introducing portable bank account numbers in its 2015 manifesto.

While the banks have been fighting off the idea of portable account numbers for years - not least because it would cost the industry somewhere in the region of £10bn to introduce - there's a case to be made that switching will never really take off without them. Portable account numbers remove the likelihood of errors taking place in any transfer, because your standing orders and direct debits are locked to the same account details, no matter who you happen to be banking with. What's more, they could potentially facilitate switches being made in a matter of hours, just like switching your mobile phone provider.

The banking industry is today setting out on an offensive to try and head off Leadsom's plan. It has come up with its own idea to increase competition - calling on ministers to support challenger banks by depositing public money with them.

It's not a bad suggestion - and merits some consideration - but it won't get around the broader issue of consumers' allergy to switching.

In my view, banks should bite the bullet and stop fighting the calls for portable account numbers. It's unthinkable that we'll still be dealing with the antiquated system of sort codes in the 22nd century, so why not agree to invest, and put their efforts into negotiating a decent amount of time to make the changes.

In reality, it will be a combination of less red tape, more support from government and better technology that will create real competition in our banking industry. Let's get to work on all three right now.